At a press briefing at the Economic Chamber of North Macedonia, the Group of Non-Banking Financial Companies presented the latest data and trends in the sector. Discussions covered the impact of regulatory changes, loan approval procedure and criteria, customer data protection, and opportunities for regional cooperation. Additionally, the Group announced upcoming activities aimed at improving the sector and increasing transparency.

Financial companies operate under the same regulatory framework as banks, insurance companies, and leasing firms within the financial system. Macedonia now has one of the strictest regulations in Europe, effectively combining technological innovation with consumer protection. In recent years, the Ministry of Finance, as the regulatory body for financial companies, has strengthened fintech industry regulations. In July 2023, additional amendments to the Law on Financial Companies were introduced to enhance consumer protection, strengthen operational procedures, and increase transparency. These changes capped all loan-related costs and prohibited reprogramming of existing loans within the same financial company. Moreover, the corporate governance requirements for financial companies were tightened by raising the minimum capital requirement from €100,000 to €500,000 and mandating the employment of an economist and a legal expert in every financial company.

In April 2024, the Ministry of Finance introduced a Rulebook on Credit Risk, ensuring that a borrower’s total monthly debt liabilities cannot exceed 70% of their income. This measure aims to protect both consumers and financial companies, ensuring sustainable and healthy growth. Reduced risk levels and lower loss provisions for risky loans will lead to more stable development and better status of financial companies. While the regulatory cap on total lending costs has lowered profitability, the reduction in non-performing loans is expected to balance operational expenses and maintain financial stability in the market.

Key effects of the regulatory changes to date:

-        Following the enactment of regulatory amendments in July 2023, the number of financial companies decreased to 27, compared to 35 active companies in 2022. This indicates that the new regulations ensured the survival of only those companies capable of adhering to the updated legal framework. For companies that had already aligned their internal procedures and systems with the new Rulebook and had been operating ethically and transparently, these changes did not cause disruptions but instead provided a fair, uniform, and standardized regulatory environment for business operations.

-        The pace of lending within the fintech industry has noticeably slowed due to the new regulatory measures, which introduce minimum capital requirements, maximum total cost rate (APR limits), and debt-to-income ratio thresholds, ensuring that a borrower's total monthly credit obligations do not exceed their monthly income beyond a defined limit. These measures enhance consumer protection and increase oversight for users of financial services.

-        The Rulebook on Consumer Protection that specified clear safeguards to prevent unauthorized loans taken out in a third party’s name has established order, decreasing frauds to a minimum. Previously, fraudulent activities involving personal data were frequently reported to the Ministry of Internal Affairs (MVR). However, since the new law came into force, such incidents have almost disappeared.

-        In 2024, the lending activity of non-banking financial companies decreased compared to previous years due to new regulatory constraints. In Q3 2024, the credit growth rate in non-banking financial companies stood at 7%, nearly matching the 6% credit growth in the banking sector. Nevertheless, the share of financial companies in the total financial system's assets remained modest at only 1.1%.

-        Investments in technological innovation have enabled the introduction of automated document verification and the implementation of registered electronic identity verification schemes, significantly reducing fraud risks.

-        Consumers are increasingly choosing fintech services not because they lack access to banking services, but due to theirease of use, accessibility, speed, transparency, that is, due to improved user experience in fintech companies.

-        Unlike banks, financial companies pay a higher tax burden as loan loss provisions are not recognized as deductible expenses.

The Group of Non-Banking Financial Companies within the Economic Chamber of North Macedonia represents the 20 largest financial companies out of the 27 total in the Republic of Macedonia, covering 74% of the market. The Group’s core priorities remain promoting ethical and responsible lending to prevent consumer over-indebtedness, as well as enhancing financial literacy to encourage responsible financial planning and household budgeting among citizens.